Archives of “Little Book of Common Sense Investing” tag

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Warren Buffett’s Biggest Losses

  
Analysis, Education
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Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” – Warren Buffett

A good starting point to gauge investment performance is to compare your results against a simple buy and hold portfolio.

While there are certainly ways to improve the performance of buy and hold, there are many more ways to make it much worse.  You have to determine if the effort and actions you take with your portfolio strategy are worth it when compared to this simple (but not easy) alternative.

Investors generally fare much worse than buy and hold so this is an important decision for the average investor to consider.

When you hear about the average long-term gains of 9-10% in the stock market you must remember that those returns contain every single type of market environment. That means high valuations, low valuations, high interest rates, low interest rates, high inflation, low inflation, bubbles, recessions, booms, busts and everything in-between.

It’s an all-inclusive number that contains the good and the bad. (more…)

John C Bogle classics- Two Books

  
  Education
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Two of John C. Bogle’s books on investing have now been designated classics. They have been added to the Wiley Investing Classics series, joining such titles as Lombard Street, The Go-Go Years, Reminiscences of a Stock Operator, and The Alchemy of Finance.

Bogle on Mutual Funds: New Perspectives for the Intelligent Investor was originally published in 1993. Since then, investments in mutual funds as a whole have surged eight-fold, and Vanguard’s fund assets have grown 25-fold. They are now 50% larger than the entire industry was when Bogle wrote this book.

To readers who are familiar with Vanguard’s philosophy, this book may seem, as Bogle himself admits, “old hat.” That is only natural. A book isn’t designated a classic if only a handful of people ever read it. Or, in the case of investing books, if its message never resonated.

Bogle on Mutual Funds had two missions: to steer the individual investor in the right direction and to cajole the mutual fund industry into adopting more investor-friendly policies. On both fronts Bogle has had considerable success, even he would like to see even more reform.

His advice to the investor is pretty straightforward, but his arguments are definitely worth rereading, or reading for the first time. People have the bad habit of throwing money at the market without knowing anything about the basics of investing. So they invest in the wrong things, or at the wrong time, and curse their bad luck. No investor can be called “intelligent” who doesn’t understand the principles Bogle articulates in this book. The investor may still decide to try his hand at outperforming the market, but he should know what he’s up against.

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